KEY POINTS:
Business ideas for sharpening the performance of our key primary industries indicate there is a big task ahead in achieving optimal exploitation of opportunities.
Agriculture, Fisheries and Forestry Minister Jim Anderton has provided the Business Herald with a list of "key messages" stemming from a recent primary industry
chief executives' forum, and comments from a subsequent meeting of industry organisation leaders.
The forum's suggestions - not Government policy, it was stressed - touch on touchy issues such as improving the primary sector's environmental performance, and barriers to exploiting genetic engineering.
The Government will consider its budgetary and policy responses to the points raised and plans to hold another pre-Budget meeting with the sector in the new year.
Establishing exactly what the Government can and will do in the short term will be challenging and fraught with political risk. If it fails to deliver something of real substance it will lose credibility with both business and the electorate, and contribute to primary sector underperformance.
But there will also clearly need to be some deft tip-toeing through a minefield of competing interests if primary industries are to be able to develop as quickly as some would like.
For example, the chief executives's forum messages noted commodity producers strive to improve margin by increasing productivity and cutting costs through intensification of resource use - actions which can threaten the environment, and marketing based on the country's clean green image. Breeding-improved animals and plants was a way of addressing the situation.
But the forum noted the barriers to genetic engineering and biotechnology research. They included regulatory requirements making research costs high, negative public attitudes and corporate fear of being tarred with the GE brush.
There was a need to change a perception of the primary sector being a poor place to work because this image drained the pool of skills and management capability available to industries. And a world-class tertiary agribusiness education provider was needed.
High rates of sick leave abuse and absenteeism were occurring under the Holidays Act, reducing workplace productivity, while drug and alcohol use meant workers were not passing job-entry testing.
The forum again raised the issue of whether the role of co-operatives in the primary sector affected the amount of capital available for development, and reduced productivity. Earlier this year, the Food & Beverage Taskforce queried whether co-operatives focused too hard on maximising supplier payout at the expense of investment for growth.
More spending on research and development was needed, the messages said, noting the R&D spend needed to rise from around 1.2 per cent of GDP to at least the current OECD average of around 2.2 per cent. An overhaul of the R&D funding system here was recommended.
A greater focus on markets such as China and other parts of Asia was another suggestion, as was getting exporters to stop "cannibalising" each other's market share and to collaborate more offshore.
The forum messages said an absence of a capital gains tax could distort investment decisions - a reflection, in part, of the fact that rising land values can tempt farmers to sell land rather than invest for growth.
Industry organisations, meanwhile, wanted the Government to sort out resource management processes, ensure efficient regulation and equitable treatment of sectors, ease compliance costs, and address labour supply issues through immigration policy.
But it's clear there are no magic wand solutions to all ills.
For example, in an interview, Anderton again pushed the idea of New Zealand concentrating on high-value niche markets rather than being a high-volume, low-cost producer. So what could the Government do? "That's what we're talking through. There's not an easy answer to this."
Ensuring the right migrants were attracted to help address the key problem of sector skills shortages was a challenging area. "Some of the international market will be pinching our best and brightest and we've got to make sure that we replace them with at least the equivalent or better."
Meanwhile, he said his and Prime Minister Helen Clark's recent comments on exporters needing to plan for a future where the dollar was higher were "generic" rather than based on some special inside information.
A stronger economy meant a stronger exchange rate over time. "All I'm really warning people is 'don't rely on a low dollar for your success' and the trouble with industries, like forestry, is that they have."
Exporting higher-value products would make businesses less vulnerable to swings in the exchange rate. The wine industry, which had "gone out to produce the best wines", was an "absolute model" of what he was talking about, he said.
It must be hoped that all of the discussion Anderton has initiated can squeeze some extra high-value juice out of the rest of the primary sector as well.
The dollar's effect on incomes and boosting sales of higher-value products were also themes at a Meat & Wool briefing.
Economist Rob Davison said a July forecast had put the average sheep and beef farm profit for 2006-07 at around $62,000, up 22 per cent. With the dollar being stronger than anticipated, the rise was now expected to be around 9 per cent to about $55,000.
But it was good to see Meat & Wool reporting a 25 per cent lift in chilled lamb exports to Europe in the year to September, with further gains being made this year. Chilled lamb fetches a premium to frozen meat and the volume sent to the EU last year rose to 42,000 tonnes, worth $450 million.
Meat & Wool's regional manager for Europe, Anne Berryman, said farm subsidy changes in the EU and more exporting of local production were giving New Zealand a strong sales platform for chilled lamb.
The long-standing British market alone took about 50 per cent more chilled lamb last year. UK manager John Mabb said there was a strong move towards British supermarkets selling fresher products.
Meat & Wool is also monitoring bioethanol-from-grain developments in the US which, if they push up the price of grain, could make grass-fed New Zealand beef more competitive in the consumer market there. Most beef sold to the US comes from culled cows and goes into items such as McDonalds burgers. But CEO Mark Jefferies said the bioethanol developments could open up an opportunity to use quota to sell prime beef cuts in the US.
